Investment column: No tea party for Whittard

Whittard of Chelsea has not proved to be investors' cup of tea over the last few months, with the shares falling by more than 10 per cent.

Yesterday's interim results from the specialist coffee, tea and ceramics merchant, highlighted the market's concerns. Sales rose by more than a fifth in the six months to November thanks to new store openings, but economic problems in Japan and the devaluation of the yen have hit margins at its 34 outlets over there. Underlying pre-tax profits rose 16 per cent to pounds 639,000 for the six months to November.

Whittard has continued to open new shops at a rapid rate. However, the group relies heavily on new openings to maintain its profits momentum. Another 12-15 UK outlets are planned this year but it is difficult to see where international growth is coming from. Expansion plans in the Far East have been affected by the financial turmoil that has afflicted the area. Perhaps wisely it has not yet decided to challenge the continental Europeans or the Americans on their own ground, and it has only just begun to dip its toe into South America and South Africa.

Whittard has been singularly unsuccessful in its attempts to diversify away from its retail business. Nothing much has so far come of plans to market specialist coffees through supermarkets. A misconceived attempt to sell casual clothes has cost the group pounds 66,000.

Whittard was an Aim high flyer. But the group has found it tougher going on the main market and the decision by the chairman and chief executive to sell some stock recently has hardly helped sentiment. The shares did edge up 3.5p to 200p yesterday, However analysts have scaled back profit forecasts for the full year from pounds 3.3m to pounds 3m, and 1998-99 forecasts from pounds 4.3m to pounds 4m, putting the shares of 16, then 13. High enough.